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Emons Transportation Group Proposes Recapitalization of Preferred Stock

27 May 1999

Emons Transportation Group, Inc. Proposes Recapitalization of Preferred Stock to Further Strategic Growth

    YORK, Pennsylvania--May 26, 1999--Emons Transportation Group, Inc. today announced that it mailed a proxy statement to its stockholders in connection with an upcoming special meeting of the stockholders of the Company to be held on June 29, 1999. At the special meeting, the Company will seek its stockholders' approval to exchange each outstanding share of its $0.14 Series A Cumulative Convertible Preferred Stock for 1.1 shares of its Common Stock. Under the current terms of the Convertible Preferred Stock, each share is convertible into 0.9 shares of Common Stock. The proposed exchange represents an inducement premium of 0.2 shares of Common Stock in excess of this amount, or approximately 297,000 additional shares of Common Stock. After consummation of the proposed merger, approximately 7.85 million shares of Common Stock would be outstanding. The exchange is structured to take place in connection with the merger into Emons of a newly formed, wholly owned subsidiary of Emons. All common shares will remain outstanding, unaffected by the merger.
    Emons believes the existence of the outstanding convertible preferred shares, with a total liquidation preference of $4,738,882, including accumulated undeclared dividends of $1,767,796 as of May 10, 1999, creates a significant obstacle to its ability to raise additional equity capital needed to achieve its strategic business plan. A primary goal of the Company is to develop new businesses through acquisitions, which will provide operational, geographical or managerial synergies related to its existing business of rail freight transportation and distribution services. Recent acquisitions have been funded with internally generated funds and debt. The Company believes it will be difficult with its existing capital structure to raise additional debt on favorable terms. The adoption of the merger proposal will give Emons the needed flexibility to raise capital on favorable terms in the future.
    Emons may withdraw the merger proposal if more than 5% of the convertible preferred stockholders have properly exercised appraisal rights in accordance with Section 262 of the Delaware General Corporate Law. Emons examined alternative methods of recapitalizing the preferred stock and determined that the proposed structure is the most favorable for both the Company and its stockholders since it would not require the use of the Company's cash, which is necessary for future growth, and also is the only practical method which would assure the Company that no shares of the existing Convertible Preferred Stock would remain outstanding after consummation of the transaction.
    Robert Grossman, Chairman and President, commented, "Emons is about to complete a very successful fiscal 1999, highlighted by internal growth and acquisitions. The Company seeks to continue to grow through internal activities, startup of new services, and selective acquisitions. We believe elimination of the existing preferred stock through the proposed recapitalization will better enable us to continue to finance our growth."
    Emons Transportation Group, Inc., is a rail freight transportation and distribution services Company serving the Mid-Atlantic and Northeast regions of the United States and Quebec, Canada, through its Pennsylvania and New England/Quebec operations. Emons currently owns five short line railroads, operates rail/truck transfer facilities and a rail intermodal terminal, and provides its customers with warehousing and logistics services for the movement and storage of their freight.

    This press release contains forward-looking statements regarding future events and the future performance of Emons that involve risks and uncertainties that could cause actual results to differ materially. Those risks and uncertainties include, but are not limited to, economic conditions, customer demand, increased competition in the relevant market, and others. We refer you to the documents that Emons files from time to time with the Securities and Exchange Commission, such as the Company's Form 10-K, Form 10-Q, and Form 8-K reports, which contain additional important factors that could cause its results to differ from its current expectations and the forward-looking statements contained in this press release.